Violation of obligations covering insider lists, Directors’ Dealings and closed periods for executives
|Penalities for natural persons||up to € 0.5m|
|Penalities for jurstic persons||up to € 1m|
Complying with MAR: Learnings from the UK
Many SME markets have struggled with to comply with MAR since it came into force and this section provides some best practice tips from the United Kingdom where it has been widely and successfully adopted.
Regulators are proactive and hunt out those not observing the rules. If there has been a mistake or poor processes are uncovered then companies can face censure, a fine and might come under public scrutiny because often the regulator publishes the results of its inspections. This can be extremely embarrassing for companies. It can negatively impact their reputation, their share price and for several UK companies in this position it has also meant management changes.
A digital solution helps to avoid human errors and makes the process of complying with MAR much easier, more efficient and more cost-effective. Manual processes like email and excel spreadsheets, on the other hand, leave a lot of room for human error which is punishable by the regulator. A digital solution also meets the expectations of the next generation, whether that is investors, analysts, media and employees. They expect to use advanced technology to deliver solutions, and MAR compliance should be no different.
The ideal digital solution would be based on a holistic approach and cover all aspects of MAR, from the collating and updating of insider lists to communicating with insiders and managing the list of Persons Discharging Managerial Responsibilities (PDMRs). It would keep everything in one place instead of information being managed across separate excel spreadsheets. It should be available in different languages and should of course be changed by the provider should the regulations and technology change.
Small companies face a particular compliance challenge because they have fewer resources than large companies. They rarely have the sophisticated teams of professionals such as company secretaries and general counsels dedicated to compliance topics, therefore it is an additional challenge for them to incorporate this regulation into their day-to-day activities. It is also very hard for small companies to keep abreast of regulations as they change and to act accordingly. Larger companies have teams of people monitoring these changes, and advisors who alert them when these events happen.
Regulators can be unwilling to make changes once regulations have been implemented and are working. If they do make changes, usually these are fairly small and might only apply to small companies rather than larger companies. Any changes ESMA makes as part of the current consultation will likely only be very modest.
There is no doubt that companies with poor corporate governance are less well rated by the market and suffer at the hands of the media. The onus is on companies to comply, and they need to consider the best and easiest way to do this.